Learning to Love Sustainability

Once perceived as a burden, companies are finally seeing that saving the environment can also be a business opportunity. Green is in, greenwashing is out.

The term “greenwashing” was coined in 1986 by Jay Westerveld, a New York environmentalist. He was writing about a new wrinkle in the hotel industry: placing signs in rooms asking guests to reuse their towels to “save the environment.” Westerveld was searching for a term to describe companies’ efforts to effortlessly portray themselves as environmentally friendly using PR gimmicks rather than actual action.

His wry term, a play on whitewashing, caught on. Since 1986, “greenwashing” has been used to describe companies that invest more in painting themselves green than in real steps, such as reducing carbon emissions. It also describes firms that stick “ecological” labels on products that aren’t really green. But it’s nothing new. Companies have been trying to paint themselves green as early as the 1960s, the very dawn of the environmental movement.

Sheila Bonini - 28122011

American oil giant Chevron is an example. In the 1980s it launched a campaign based on the slogan “People DO,” stressing how humans help animals such as turtles and bears.

Ever since, Chevron, one of the world’s largest oil companies and one of the biggest polluters as well, has run similar campaigns aimed at capturing the hearts of ecologically-minded consumers. Its latest salvo was launched this year under the slogan “We Agree,” featuring smiling citizens of all races and backgrounds “agreeing” that oil companies needed to support renewable energy and environmental initiatives. The world greeted the campaign with bemusement and ridicule.

But companies draping themselves in the trappings of environmental awareness are mere symptoms of a much deeper problem. Most don’t believe in environmental awareness and sustainability at all. Most of their investments in green projects and processes, such as in reducing greenhouse-gas emissions, stem from image considerations, not business considerations. Their actions are designed to placate consumers who demand businesses reduce their environmental impact. Executives at large corporations have not viewed sustainability as advantageous to the bottom line.

But this is changing. A study by consulting firm McKinsey shows that in 2011, companies started integrating sustainability into their business models in earnest. This wasn’t just PR anymore; they figured out that sustainability means money.

When times are hard, when recession or even depression loom over the planet, cutting back on energy is an efficient and environmentally friendly way to cut expenses. Suddenly sustainability has morphed from a burden meant to mollify the media into a critical tool during tough economic times.

McKinsey surveyed 3,203 senior executives whom it said represented the full range of regions, industries, tenures, company sizes and functional specialties. A third of the respondents said the main reason their companies had undertaken green initiatives was operational − a 14% increase from 2010. In 2010, 27% said the motive was new business opportunities; a third admitted it was pure PR.

The McKinsey survey reveals companies are becoming more environmentally aware: 57% of the executives said their firms had integrated sustainability into their strategic planning; 39% said sustainability was a consideration in budgeting.

Another 31% said sustainability is compatible with their social goals and corporate values. Meanwhile, 46% said their companies have taken steps to encourage sustainability as a response to business opportunities or regulatory restrictions.

What does this mean in practice? In the survey, 63% said their companies have reduced energy consumption, 61% said their firms are decreasing their waste production and 22% said their companies are working on ways to reduce climate change.

To a certain extent, McKinsey forecasts the end of greenwashing, argues Sheila Bonini, a consultant at the firm’s Silicon Valley office and one of the report’s authors. Companies are adopting sustainability for the sake of sustainability, not just to look good, she says.

With the advance of social networking, transparency has increased: It’s harder for companies to pretend to be green, because they can’t make claims they can’t support, she explains. Many companies these days set out on this path for efficiency reasons, impelled not only by consumer opinion but also risk management, increased efficiency and a search for growth opportunities, Bonini says.

More and more companies understand that sustainability and protecting the environment mean not only saving the earth, but also potentially increasing profits, says Bonini.

Examples of green activities include saving energy, where everyone is a winner, she says: Companies do something nice for the planet and also save money.

For leading companies, that’s just the start. They seek opportunities to grow and change their businesses in green ways. For instance? They seek ways to make products and services more sustainable and other ways to attract customers.

Dow Chemical and General Electric, for example, have adapted their business models to meet considerations of sustainability, according to Bonini. Dow Chemical for one has seen the future and become more efficient in energy usage and reduced its waste. As for GE, it first reduced emissions and then developed more sustainable products.

Initially, many companies were pushed into sustainability due to climate change, Bonini says. They expected pressure from consumers, saw that regulation was moving in that direction and started making changes.

At first, it was a response to the change in consumer and regulatory opinion, but then they spotted another aspect to the opportunity that made them see sustainability in a different light, she says. Thus, what was once perceived as a risk is now considered an opportunity.

That’s the beauty in business, she feels. At first business sees new things as a challenge, so they oppose it. But with deeper understanding, they see the opportunities and no longer fear it. Companies are now comfortable with the idea of sustainability, says Bonini.

Both the McKinsey report and Bonini herself call sustainability a “trend.” But it’s a strategic change that’s not going away, she herself says. True green is here to stay, and it includes increasing pressure on companies to reduce their carbon emissions and save water, she says. Actually, trend isn’t the right word, Bonini herself admits: Trends are transient. They pass. True green is a change that will only pick up steam. Companies are not about to take their environmental policies backward.

This article was originally published in TheMarker Magazine’s December issue in Hebrew.